Oversea-Chinese Banking Corporation (SGX:O39), or OCBC for short, has a long history dating back to 1932 – where the bank was formed as a result of the merger of 3 local banks, with the oldest founded in 1912.
Today, OCBC is the second largest financial services group in Southeast Asia by total assets, with one of the world’s highest credit rating (Aa1 by Moody’s, and AA- by both Fitch and S&P). It currently has more than 400 branches and offices in Singapore, Malaysia, Indonesia, Vietnam, and Thailand, as well as in China, Hong Kong, Macau, and Taiwan.
Early this morning (04 August 2023), the Singapore-listed bank have released its results for the 2nd quarter, as well as for the 1st half of FY2023 ended 30 June (in case you’re wondering, UOB is the first to release its results last Thursday, and you can read my review about it here; DBS have also released its results yesterday, and you can read my review about it here). In this post, you will read about my review of its latest financial performance, key financial ratios, and also its dividend payout to shareholders.
Let’s begin:
Financial Performance (1H FY2022 vs. 1H FY2023, and Q2 FY2022 vs. Q2 FY2023)
In this section, you will find my review of OCBC’s financial performance for the first half of the year, and then for the 2nd quarter:
1H FY2022 vs. 1H FY2023:
| 1H FY2022 | 1H FY2023 | % Variance | |
| – Net Interest Income (S$’mil) | $3,203m | $4,727m | +47.6% |
| – Net Fee & Commission Income (S$’mil) | $999m | $883m | -11.6% |
| – Other Non-Interest Income (S$’mil) | $1,021m | $1,195m | +17.0% |
| Total Income (S$’mil) | $5,223m | $6,805m | +30.3% |
| Total Expenses (S$’mil) | $2,458m | $2,573m | +4.7% |
| Net Profit Attributable to Shareholders (S$’mil) | $2,592m | $3,589m | +38.5% |
My Observations: OCBC’s results for the first half of FY2023 was a strong one – where the jump in its total income (by 30.3% to $6,805m, a new high for the bank) was contributed by improvements recorded in its net interest income (by 47.6%, which can be attributed to a 6% increase in average assets, and a 65-basis point expansion in net interest margin to 2.28%), as well as in its other non-interest income (by 17.0%, due to a 10% growth in profit from insurance, mainly attributable to improved investment performance, and a 36% growth in its wealth management income [to S$2.24bn, a record for the bank] – which comprises of income from insurance, private banking, premier private client, premier banking, asset management, and stockbroking).
This was offset by a 11.6% decline in its net fee and commission income, due to weaker wealth, brokerage, and fund management fees amid continued risk-off investment sentiments.
On the 4.7% increase in total expenses, it was mainly due to an increase in staff costs associated with salary adjustments and rise in headcount and technology to support growth.
Finally, its net profit attributable to shareholders, at $3,589m, was also a new record for the bank.
Q2 FY2022 vs. Q2 FY2023:
| Q2 FY2022 | Q2 FY2023 | % Variance | |
| – Net Interest Income (S$’mil) | $1,700m | $2,389m | +40.5% |
| – Net Fee & Commission Income (S$’mil) | $477m | $430m | -9.9% |
| – Other Non-Interest Income (S$’mil) | $487m | $636m | +30.6% |
| Total Income (S$’mil) | $2,664m | $3,455m | +29.7% |
| Total Expenses (S$’mil) | $1,253m | $1,329m | +6.1% |
| Net Profit Attributable to Shareholders (S$’mil) | $1,481m | $1,710m | +33.5% |
My Observations: OCBC’s financial results for the 2nd quarter of the year is equally as strong – contributed by a 29.7% improvement recorded in its in total income, which can be attributed to a 40.5% jump in its net interest income (underpinned by asset growth and a 55-basis point increase in net interest margin to 2.26% on the back of the rapid rise in market interest rates), and a 30.6% jump in its other non-interest income (attributed to net gains from the sale of investment securities, and a higher profit from insurance.)
Total expenses was up by 6.1% due to a rise in staff cost.
Key Financial Ratios (Q1 FY2023 vs. Q2 FY2023)
Moving on, let us take a look at some of the key financial ratios reported by the Singapore-listed bank, where I will be comparing the figures reported for the current quarter under review (i.e. Q2 FY2023 ended 30 June 2023) against that reported in the previous quarter 3 months ago (i.e. Q1 FY2023 ended 31 March 2023):
| Q1 FY2023 | Q2 FY2023 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 2.30% | 2.26% | -0.04pp |
| Return on Equity (%) | 14.7% | 13.5% | -1.2pp |
| Non-Performing Loans Ratio (%) | 1.1% | 1.1% | – |
My Observations: Return on Equity fell slightly to 13.5% as a result of a dip in net profit (from S$1,879m in Q1 FY2023 to S$1,710m in Q2 FY2023), mainly due to higher general allowances.
While the bank’s non-performing loans ratio remains the same in percentage-terms, but in dollar-terms, it is down slightly – from S$3,329m in Q1 FY2023 to S$3,275m in Q2 FY2023, mainly attributable to recoveries and upgrades in Singapore, Malaysia, and Indonesia, offset by a rise in non-performing loans from ‘rest of the world’ – mainly from the downgrade of a corporate account in the commercial real estate sector in the United States.
Dividend Payout to Shareholders (1H FY2022 vs. 1H FY2023)
The management of OCBC declares a dividend payout to shareholders on a half-yearly basis – once when it releases its results for the first half of the year (which is now), and for the second half of the year.
For 1H FY2023, a dividend payout of 40.0 cents/share was declared – a 42.9% jump compared to the dividend payout of 28.0 cents/share declared for the same time period last year (i.e., 1H FY2022) – this represents a payout ratio of 50% of the bank’s 1H FY2023 net profit, in-line with its policy.
If you are a shareholder of the Singapore bank, do take note of the following dates on its dividend payout:
Ex-Date: 14 August 2023
Record Date: 15 August 2023
Payout Date: 25 August 2023
CEO Helen Wong’s Comments & Outlook (from the Bank’s Press Release)
“We have delivered a robust set of results for the first half of 2023. The Group achieved record net profit, which crossed the S$3 billion mark for the first time on the back of strong contributions from the Group’s banking, wealth management and insurance franchise. With the resilient performance and OCBC’s strong capital position, we are pleased to raise the interim dividend by 43% or 12 cents from a year ago to 40 cents, representing a payout ratio of 50%.
Our sustainability journey is progressing well. This year, we unveiled our sectoral decarbonisation targets, demonstrating our firm commitment to achieving net zero by 2050. Our sustainable financing commitments have crossed S$47 billion, and we are on track to achieve our target of S$50 billion by 2023, two years ahead of schedule. We were recognised as the Best Bank for Sustainable Finance in Singapore by Global Finance in July 2023.
To solidify our One Group approach to capturing growth opportunities, we have recently launched a unified brand and logo across our core markets, as well as a new tagline: For now, and beyond. We are committed to leveraging the combined strength of our strong network and enhancing our One Group capabilities to drive the medium-term growth initiatives that we have identified. At the same time, we will continue to be prudent in our risk and capital management given the uncertain global economic outlook.”
Closing Thoughts
On the whole, I felt the OCBC’s results (for the 2nd quarter, as well as for the 1st half of the year) was a strong one, where its attained new records for its wealth management income (which went up by 36% to S$2.24bn), total income (which climbed by 30% to S$6,805m), and also its net profit attributable to shareholders (which rose by 39% to S$3,589m) for the 1st half of the year.
With a jump in net profit attributable to shareholders, its interim dividend payout also rose in tandem – by 42.9% to 40.0 cents (from 28.0 cents last year), representing a payout ratio of 50.0%, as promised by the bank’s management during its AGM back in April (you can read a summary I have compiled about it here).
With that, I have come to the end of my review of the Singapore bank’s latest results for the 2nd quarter, and for the first half of FY2023. As always, I hope you have found the contents presented in this post useful, and do take note that everything you have just read above is purely for educational purposes only. They do not represent any buy or sell calls for the bank’s shares. You are strongly encouraged to do your own due diligence before you make any investment decisions.
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Disclaimer: At the time of writing, I am a shareholder of Oversea-Chinese Banking Corporation Limited.
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